London stockbroker firm Arden Partners caused a wave of excitement in the buy-to-let sector when it issued an analyst’s note stating that Paragon could be “weeks away” from a return to new lending.
Paragon stopped new lending in February 2008 because it failed to secure commercially acceptable terms to extend the wholesale loan facility that it relied on to fund new business.
The Arden note forecast that, due to Paragon’s willingness to resume lending and considerable improvements in market conditions, it is likely to start lending again by June.
Arden Partners financial analyst Peter Lenardos says: “You have a management team that wants to do it, bond investors gagging for products and professional buy-to-let landlords that cannot get a loan anywhere. There is no reason for them not to do it. It does not take a rocket scientist to figure out they are prepping us for a bond issue. I will be shocked if they do not do this by June.”
But Paragon refuses to put a timescale on a return – although a spokesman told Money Marketing that developments in the securitisation market are encouraging.
Brokers have reacted positively to the news of Paragon’s possible return and say the biggest lenders – BM Solutions, The Mortgage Works and Godiva – only offer more mainstream products. Landlord Mortgages managing director Lee Grandin says Paragon’s return would cater for more “quirky” purchases.
He says: “There is a big gap in buy-to-let funding. A lot of the standard purchases are being done but many landlords buy more quirky types of properties, such as bedsits, split flats, lets for DSS tenants, councils and housing associations – and Paragon specialised in that area.”
A National Landlords’ Association spokesman says Paragon’s return would be welcome.
He says: “If it is true, we look forward to Paragon re-entering the market and offering the good service it was renowned for. Landlords, like consumers, like to know there is a variety of products and services available.”
BM Solutions says competition would be good for the market.
Head of sales Phil Rickards says: “Over the last couple of years there has been a real reduction in active lenders in the buy-to-let sector. We know from the performance of our own range and by talking to brokers that landlord demand is still strong.
There are challenges in meeting that demand but increased competition would be a good thing.”
Mortgages for Business managing director David Whittaker says he is relieved that the conversation has switched from lenders leaving to lenders returning to the market.
He says: “With talk of new lending, at least the sector is not in full-scale withdrawal now.”
But Whittaker warns that lenders could be driven back out as the FSA has proposed extending the scope of its regulation to buy to let in the mortgage market review.
He says: “The FSA has to draw the distinction between amateur and professional landlords. If regulation is too tight, a lot of lenders may turn into limited companies, meaning they will be corporate – and corporate companies fall outside the regulator’s remit.”
The NLA spokesman says: “Do landlords need consumer regulation? They are not treating their business like a hobby and are not consumers in the true sense of the word. For portfolio landlords, it is a business and businesses are not afforded consumer protection.”
However, the prospect of buy-to-let regulation does not worry Rickards. He says: “At BM, we have always dealt with buy to let as a regulated product and our intermediary partners are all used to dealing with us on that basis.”